VR GROUP LTD Report and financial statements of the Board of Directors 2016 1 Jan−31 Dec 2016 2

Contents Market conditions and operating environment ...... 3 Consolidated net sales, result and liquidity ...... 3 Passenger services ...... 4 VR Transpoint ...... 4 VR Track ...... 5 Shareholders' equity ...... 5 Main events during the financial year ...... 5 Capital expenditure and rolling stock purchases ...... 7 Changes in corporate structure and real estate transactions ...... 8 Safety ...... 8 Environment ...... 8 Assessment of business risks and uncertainties ...... 9 Personnel ...... 10 Rewarding ...... 11 Management and audit ...... 12 Major events after the end of the financial year ...... 13 Outlook for 2016 ...... 13 Board’s proposal on the disposal of profit ...... 14 3

Market conditions and operating environment

Market conditions remained tight for long-distance traffic in VR passenger transport operations as price competition for long-distance traffic further increased. Domestic long-distance competitiveness was strengthened in February by permanently lowering ticket prices and making the pricing structure clearer. These significantly lowered prices led to market-based train journey numbers rising once again, especially on the main routes between large cities. However, the lower price level also meant, as anticipated, a drop in net sales. The drop in net sales was also affected by the Ministry of Transport and Communications’ (LVM) contract traffic cuts made in March 2016. However, from May onwards there was an upturn in the number of passengers using the Allegro trains. For commuter traffic, a contract extension to Summer 2021 was signed with Helsinki Region Transport (HSL). After this, the HSL tendered commuter traffic contract will enter into force.

For passenger transport, trains are in competition with both other forms of public transport as well as private vehicles. The number of passengers is affected by factors such as consumer and travel habits, the regional distribution of the population, developments in the infrastructure and transport services for different modes of transport, and the environmental friendliness of different modes of transport. Pricing, travel times and availability are the main factors influencing the demand for services, but also important are comfort, punctuality and the smoothness and ease of the overall travel process.

General market conditions in the logistics sector have been tight for a couple of years already, and this can be seen in VR Transports lowered freight prices and heightened competition. The economic situation has improved since the beginning of 2016, but there is still over supply in transport services for some transport flows.

VR Track focuses on producing planning, construction and maintenance services for the Finnish and Swedish markets based on the lifespan of infrastructure projects. Competition has tightened further in the markets for track construction and maintenance, and every job is won through a competitive tendering process.

Consolidated net sales, result and liquidity

The Group’s net sales in 2016 were EUR 1,186.7 million (EUR 1,231.4 million in 2015), a decrease of 3.6 per cent on the previous year. Most of this change can be accounted for by the lowered price level for long-distance passenger services.

VR Group posted an operating profit of EUR 43.3 million (EUR 65.4 million).

Operating profit for 2016 was strong in all Finnish business operations. VR Group’s result was weakened, however, by the losses experienced by VR Track’s Swedish subsidiary VR Track Sweden. These losses resulted primarily from one maintenance project. It has been agreed to end the project in question ahead of schedule. Losses from this project for the coming years have also been recorded in the result for 2016.

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Passenger services

VR’s net sales for passenger services was EUR 502.0 million (EUR 534.8 million), which represents a drop of 6.1 per cent. This figure includes a 7.9 per cent fall in net sales for train transport, and a 1.3 per cent decrease for bus and coach transport. Net sales for restaurant services provider Avecra rose by 2.2 per cent overall, with particularly high growth for train services.

In 2016, a total of 117.9 million passenger trips were made. The number of journeys rose by 6.7 per cent compared to the previous year. A total of 82.1 million train journeys were made, representing an increase of 9.0 per cent on the previous year. A total of 35.8 million bus and coach journeys were made, representing an increase of 1.7 per cent on the previous year.

For long-distance traffic, journey numbers increased by 2.8 per cent in spite of the significant cuts in LVM contract traffic. The quantity of market-based journeys rose by 8.4 per cent. The number of journeys made on Allegro services between Finland and Russia increased by 8.2 per cent.

The filling rate for market-based traffic clearly increased, rising to 41.7 per cent. Commuter traffic journeys rose by 10.2 per cent, in large part thanks to the Ring Rail Line.

Passenger Services recorded an operating profit of EUR 16.6 million (EUR 9.9 million). The competitiveness programme initiated in 2015 for increasing the operational efficiency of long-distance traffic lowered expenses by EUR 41.9 million. The set goal of EUR 50 million of expenses saved will be achieved in full during 2017. Efficiency measures have made possible a lowering of ticket prices. Also, the earlier-initiated efficiency measures for commuter traffic continued.

The punctuality of long-distance services in 2016 was 86.0 per cent (87.2%), while the figure for commuter services was 95.5 per cent (94.7%). The factors behind these delays included rolling stock and safety equipment malfunctions as well as the extra speed limits resulting from track work, which continued throughout almost the whole year.

VR Transpoint

Net sales for VR Transpoint totalled EUR 380.7 million, an increase of 0.1 per cent on the previous year (EUR 380.5 million). Net sales in rail logistics grew by 3.0 per cent, but net sales in road services declined by 9.6 per cent compared to the previous year. VR Transpoint posted an operating profit of EUR 34.5 million (EUR 27.0 million).

VR Transpoint’s transports consist primarily of raw materials and products for the mechanical and chemical forest industry and the metal, construction and chemical industries. VR Transpoint's total transport volumes in 2016 rose 7.6 per cent from the previous year's levels, totalling 41.3 million tonnes (38.4 million tonnes).

Rail logistics improved its result through improvements in operational efficiency, which also enabled investments in price competitiveness.

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VR Track

VR Track’s net sales were EUR 294.3 million (EUR 300.5 million), which represents a decrease of 2.1 per cent on the previous year. VR Track posted an operating loss of EUR -14.1 million (EUR 18.1 million). The loss resulted primarily from one project undertaken by VR Track’s Swedish subsidiary VR Track Sweden AB. It has been agreed with the client that this project be concluded in April 2017. The projected losses for the remaining duration of the project have been entered into obligatory provisions having a negative effect on the accounting period’s result. VR Track Sweden has initiated a change programme for improving profitability, and operational efficiency has already improved.

In Finland, VR Track's construction business activities developed positively, with net sales rising by 11.1 percent compared to the previous year. Business related to infrastructure project planning also developed well, seeing a rise of 14.2 per cent in net sales.

The other financial indicators are given in section [23] of the notes to the financial statements.

Shareholders' equity

The company has a total of 2,200,000 shares. The company's share capital is EUR 370,013,438.22. The parent company's distributable profit totalled EUR 91.8 million at the end of 2015.

Main events during the financial year

The pricing reforms to long-distance passenger services introduced in February 2016 had their anticipated impact, causing a rise in journey numbers. The competitiveness programme initiated in 2015 for boosting the efficiency of long-distance traffic was implemented to its full extent and will result in annual savings of EUR 50 million. Part of the co-determination talks carried out as part of the programme were concluded in the first half of the year.

During the year, a number of changes were made to the timetables and transport structure for long-distance traffic. In June, many routes were made faster and the number of direct connections was increased, resulting in the average speed on the rail network rising to 113km/h (2015 106km/h). The number of contract and public service obligation services was reduced in March, which resulted from the cuts to the LVM contract traffic budget. LVM issued a new decision on the content of VR’s public service obligations which is in effect until December 2017. Public service obligations refer to loss-making services that have to be run as part of the exclusive rights agreement. The new public service obligation structure and increase in market-based services brought to different parts of Finland hundreds of extra train services per week.

Significant investments continued into long-distance rolling stock, with 10 new sleeping cars being acquired during the year.

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Ticket sales have shifted significantly towards self-service channels, which now account for 80.5 per cent of journeys sold. The largest growth was in sales via mobile phone, which increased by 80.6 per cent.

A new five-year direct award agreement, effective from 1 April 2016, was made between VR commuter traffic services and HSL. Through this agreement, commuter traffic services are preparing for implementation of a new customer service model. Ticket sales will transfer to digital channels for commuter traffic as well: in autumn a new VR Lähijunat mobile app will be released and single tickets will be available for sale in the vr.fi online store.

Net sales for Pohjolan Liikenne’s city bus services rose by 1.7 per cent for the whole year. The growth was seen primarily in the autumn, as new service agreements began in August for Espoo and Helsinki transport and delays to the Länsimetro brought the company extra coach service demand. The extra business led to a 26 per cent increase in vehicle stock and the hiring of 170 extra bus drivers.

Avecra sales saw strong growth in both domestic train services and Allegro services. As of June, restaurant services are on offer on all domestic long-distance routes. Attention was also focused in Avecra on improving customer service. Similarly, work was done to develop a new train concept, one which will change the range of food and drink on offer as well as the restaurant environment itself. The new concept will be implemented at the start of 2017. During 2016 Avecra streamlined its administration and adjusted its operations in accordance with the company’s new strategic objectives. The Pasila station units closed due to the construction works for the new Pasila station.

Factors contributing to the clear rise in VR Transpoint’s volumes included higher demand for customers’ final products and improved price competitiveness. Positive developments in rail logistics volumes resulted especially from a clear growth in Russian import and transit transports.

Forest industry volumes saw a very pleasing increase. Successes were achieved in forest industry transports, but there were also realised volume risks due to a fall in raw material prices. Variations over the course of the year in chemical industry imports were partly due to availability risks from the customers’ own suppliers.

There were further improvements in 2016 in the operating efficiency of rail logistics. Thanks to increased operational efficiency, a higher level of cost efficiency was achieved. Development of planning and work methods and better use of technology made possible an increase in average train weights and an adjustment of total train kilometres. This positive trend has continued since 2012. Electric traction’s share of total transports increased to record levels, reaching 76 per cent.

A new domestic road logistics terminal was opened in Riihimäki. Also, there was clear growth in traffic connected with the Rail&Road concept, which combines rail and road transports.

VR Transpoint saw in increase in customer satisfaction levels. In the most recent survey, the overall satisfaction rating was 3.85 on a scale of 1 to 5. The comparable result for the previous year was 3.82.

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Rail logistics punctuality dropped slightly, but remained at a good level at 91.2 percent (93.1). The target for freight traffic punctuality was 91.9 per cent with a 30 minute delay threshold.

VR Track saw success in Finland in 2016 with its large railway projects. During the year, contracts were won for the Oulu–Kontiomäki superstructure project and the Riihimäki–Tampere renewal of safety equipment. The later was carried out in consortium with Siemens Oy. In addition, the implementation phases began for the alliance projects won the previous year, the Tampere tram project and the Äänekoski bioproduct mill. Several of the larger projects were completed this year, including Vaala–Kivesjärvi superstructure contract 2, Kokkola–Riippa construction contract 1 and the Ruha–Lapua railtrack contract.

The most significant planning projects were for the Tampere Tram Alliance and the transport connections for the Äänekoski bioproduct mill. Regarding maintenance work in Finland, the maintenance contract for rail network maintenance area 5 came to an end and the development phase began for the maintenance alliance for rail network maintenance area 2. Deliveries of track materials continued at a good level and the capacity utilisation rate at Haapamäki impregnation plant was better than in the previous year. It was decided together with the client Trafikverket to terminate in April 2017 the contract for the Södra Stambana maintenance area in Sweden.

Defects were observed in point maintenance of the track maintenance areas in Finland which VR Track is responsible for. The defects were repaired during Autumn 2016 and operating practices and work methods have been improved.

Ville Saksi, Managing Director of VR Track Oy, handed in his notice in September. Teemu Sipilä, General Counsel at VR Group, took the role of acting Managing Director for VR Track, and at the end of November Harri Lukkarinen was named as the new Managing Director. In September, Managing Director Mattias Hörling took the helm of VR Track Sweden AB.

In June 2016, VR Group Ltd President and CEO Mikael Aro handed in his resignation and continued for another six months until the end of his period of notice. In October, Rolf Jansson was named as the new President and CEO of VR Group Ltd.

Capital expenditure and rolling stock purchases

The Group's total investments in 2016 amounted to EUR 123.1 million (EUR 119.8 million). Leasing agreements accounted for EUR 21.5 million (EUR 29.8 million) of total investments. Expenditure on rail rolling stock totalled EUR 59.0 million (EUR 70.6 million). IT investments accounted for EUR 19.0 million of this total (EUR 15.5 million) and expenditure on property for EUR 20.3 million (EUR 17.6 million).

The most important investments comprised new control and sleeping cars for passenger services, bus purchases for Pohjolan Liikenne and rolling stock for VR Transpoint. The impact of investment in new electric locomotives in 2016 was still relatively small but its impact will increase substantially in the coming years. The other investments were primarily replacement investments for fixed assets.

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Changes in corporate structure and real estate transactions

April saw the founding of VR Infrapro AB, a subsidiary wholly owned by VR Track Oy that will carry out project planning business activities in Sweden.

In June, ZAO ATV’s legal form was changed and its name changed to AO Transpoint International. AO Transpoint International is a wholly owned subsidiary of Transpoint International (FI).

In July, 10 per cent of the shares of associated company Vossloh Cogifer Finland Oy were sold, followed in October by a sale of 10 per cent of shares in Vossloh Rail Services Oy.

2016 saw the termination of operations for both VR Track Oy’s Estonian subsidiary VR Track Estonia AS and the Estonian branch office.

Profits on the sale of real estate in 2016 totalled EUR 14.0 million (EUR 17.4 million).

Safety

In 2016, there were no accidents in train traffic or shunting operations resulting in deaths among passengers or personnel. The most dangerous situation occurred in August, when a freight train collided into empty freight wagons in the Oulu shunting yard.

The number of deviations in shunting operations declined. For train operations, however, there was a rise in the number of deviations, particularly in the areas of incorrect access paths, passing of stop signs and collisions. A special action programme was drawn up at the end of 2016 for the development of railway safety. This programme will extend into 2017.

Supervisors held more safety briefings than in 2015 in order to improve the safety culture and the target for occupational safety observations by employees was substantially exceeded.

The Group’s accident rate target was achieved. The rate achieved was 13.0 and the goal was 15.5 (accidents per million work hours). VR Group is continuing its systematic work to reduce the number of accidents.

Environment

The Group has a joint environment management system which complies with the requirements and implementation guidelines of the ISO 14001 standard. VR Group continued the implementation of its environmental promises during the year. Carbon dioxide emissions of train traffic declined by 5 per cent, a result of lower consumption of diesel fuel. The proportion of renewable energy in rail traffic increased to 72 per cent (71%).

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Soil surveys and decontamination comprise in financial terms a significant part of the Group’s environmental activities. The costs for action relating to the soil and groundwater totalled EUR 1.1 million (EUR 1.1 million).

In accordance with its environmental promises, VR Group aims to operate in a more energy and material efficient manner and increase the use of renewable energy. The Group will ensure that there are no chemical leaks polluting the environment during transport or other operations. The aim is also to ensure that customers are satisfied with the cleanliness of stations and trains.

In Spring 2016, VR Group signed a contract together with two partnering organisations for the implementation of a system to support economic driving methods. Rail traffic consumes three quarters of VR Group’s total energy consumption. The remaining quarter is consumed in the running and maintenance of machine shops, depots, road transport and building premises. The guidance system for economic driving will improve the efficiency, punctuality and reliability of rail traffic. The system was in test-drive phase during 2016.

VR Group’s environmental activities, key figures and the environmental promises for the period 2013 - 2020 are presented in the responsibility section of the annual report.

Assessment of business risks and uncertainties

The largest business risks faced by VR passenger services relate to tight competitive conditions and the opening up of the market to competition. VR Group is preparing for competition in railway passenger services. VR has exclusive rights to the provision of railway passenger services until the end of 2024, but the Ministry of Transport and Communications has notified that it intends to speed up the opening of the railways to competition. Trains compete continually with other modes of transport, especially with bus and coach services and private motoring.

VR’s most significant operational risks relate to the condition of track infrastructure and ageing rolling stock as well as disruptions caused by weather conditions. VR has protected itself against business risks by means of insurance arrangements.

VR Transpoint estimates that the improved economic outlook will bring growth, but the risks related to Russia are sill significant for business operations. The major sources of uncertainty faced are possible structural changes in Finnish industries and their impacts on production volumes, and the new competition in Russian traffic that will result when the new Finnish-Russian Railway Traffic Agreement enters into force. Possible implementation problems or cancellations of the investments planned in forest and mining industries would affect future prospects.

VR is responding to the opening up of eastern traffic routes and the tightened competition that will result by improving its competitiveness and by adopting a strongly customer-oriented approach. In road logistics, efforts are being made to achieve profitable growth after a difficult market cycle. Raw material prices on the world market can have a significant impact on demand for metal products and the transport flows most important to VR Transpoint.

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The most significant domestic risks for VR Track relate to increased competition in track construction and maintenance, maintenance of the quality anomalies identified in 2016, and reliance on one large customer. Tough competition on contracts in Sweden has resulted in low project profitability. Tougher competition affects contract pricing and there is a great deal of pressure to remain competitive. In earlier years, the contracts won in Sweden have turned out to be unprofitable in part, and so the change programme initiated in 2016 seeks to raise the profitability of operations to the desired level. No significant contracts were won in Sweden in 2016 owing to low participation in new contract competitions.

In line with its financial policy, VR uses interest and commodity derivatives to lower the interest and commodity risks resulting from the financial leasing debts and future electricity and fuel purchases on the Group’s balance sheet. VR applies hedge accounting principles in the protection of future cash flows (cash flow protection). These principles are applied to fuel and electricity price risks and in protection against financial leasing interest payments.

Personnel

There were further reductions in the number of personnel in VR Group in 2016. The reduction amounted to 717 Full Time Equivalents and the average number of personnel during the year was 7,898. VR Group continues to adhere to the change security model in accordance with the principles observed by the Group. A total of 416 persons retired during the year.

A total of 72 per cent of the employees submitted responses to the personnel survey conducted in the autumn (response rate for 2015 was 73%). From these responses, the clearest increases can be seen in the belief in future success and VR’s capacity for renewal and development. Supervisory work has continued to develop, with the supervisor index rising from 3.72 to 3.74 and now standing at a good level also in relation to external comparative data. The overall result of the personnel survey at group level was 3.41 (compared with 3.43 in 2015).

Personnel figures 2013 - 2016 2016 2015 2014 2013 Full Time Equivalents – average 7898 8,615 9,689 10,234 Change -8.3 -11.1 -5.3 -7.6 Number of employees working outside 470 514 580 531 Finland Total salaries and wages EUR million 380.7 396 445.1 460.9 Permanent employees (average) % of 97.9 97.6 98.4 97.4 Group work force 2) Fixed term employees (average) % of 2.1 2.4 1.6 2.6 Group work force 2) Full time employees (average) % of 94.9 94.8 96.4 96 Group work force 2) Part time employees (average) % of 5.1 5.2 3.6 4 Group work force 2) % of men in work force 2) 82.4 82.4 82.4 82.4 11

% of women in work force 2) 17.6 17.6 17.6 17.6 Average age of personnel, years 2) 44.3 44.5 44.9 45 Average length of employment 15 16 18 19 relationship, years 2) Number of new employment 784 670 683 718 relationships 2) 3) Number of employment relationships 1214 1,389 1,182 1,166 ended 2) 3) Total personnel turnover % 2) 3) 12.2 11 9.9 8.5 Retired 2) old-age pension 375 359 408 445 disability pension 41 55 55 62 Average retirement age 2) 59.4 59.1 59.1 58.9 % of personnel that have development 78 80 73 78 interviews 2) Sickness absence as % of regular 4.9 5 5.4 5.3 working hours 2)

Group’s accident frequency rate (total number of accidents at work per 13.0 15.3 18.9 19.1 million hours worked)

1) The employment relationships of the personnel in VR Track's and VR Transpoint's foreign operations are given as employment relationships valid until further notice. This is because no information on fixed-term employment relationships has been collected. 2) The figures do not include the foreign operations of VR Track and VR Transpoint. 3) For 2015, the figures describing the personnel turnover rate include both permanent and fixed term employees (until 2014 only permanent employees were included).

Rewarding

During the fiscal period, in accordance with the decision of the Annual General Meeting held on 29 March 2016, the chairman of the Board of Directors of VR-Group Ltd was paid fees of EUR 54,750, the vice chairman EUR 25,800 and the ordinary members EUR 22,800 for the year. In addition, the Board chair and members are paid a fee of EUR 600 for each meeting. In accordance with the decision of the Annual General Meeting, the chairman of the Supervisory Board was paid a fee of EUR 800 per meeting, the vice chairman EUR 600 and the ordinary members EUR 500.

In addition to the attendance fees, Supervisory Board members also receive a free VR rail pass.

VR-Group Ltd appointed a new President and CEO in October 2016. The salary and fringe benefits paid to Mikael Aro in 2016 totalled EUR 550,636 and the bonus paid to him for 2015 on the basis of the short-term incentive scheme was EUR 132,962. The sum paid as salaries includes work in special tasks of the Board of Directors between 12

20 October and 30 November 2016 and the payments arising from the end of the employment relationship (including annual holiday).

The retirement age (63 years) and pension for the President and CEO are in accordance with the Employees’ Pensions Act. Mikael Aro had an additional pension insurance paid by the employer that includes life insurance in case of death. In 2016, the costs arising from the insurance totalled EUR 9,605.

The salary of the new President and CEO for the period 20 October - 31 December 2016 totalled EUR 74,048.

The bonus scheme of VR Group covers all personnel. VR Group complies with current collective agreements and legislation applying to the sector when paying salaries, wages and other remunerations to its employees.

Management and audit

The Annual General Meeting held on 29/03/2016 decided that the Board of Directors of VR-Group Ltd will have eight members. Hannu Syrjänen was re-elected chairman of the Board. At its constitutive meeting after the Annual General Meeting, the Board of Directors elected Heikki Allonen to continue as vice chair. Riku Aalto, Jarmo Kilpelä, Roberto Lencioni, Liisa Rohweder, Tuija Soanjärvi and Markku Strandberg will continue as the other members of the Board. The Board of Directors met a total of 15 times during 2016, with an attendance rate of 97 per cent.

On 31/03/2016, Board elected Hannu Syrjänen (chair), Heikki Allonen, Liisa Rohweder and Jarmo Kilpelä to serve in the human resources committee. During 2016 the human resources committee met three times and the average attendance rate of its members was 100 per cent. On 31/03/2016, the Board elected Maija Strandberg (chair), Riku Aalto, Roberto Lencioni and Tuija Soanjärvi to serve in the audit committee. During 2016 the audit committee met six times and the average attendance rate for its members was 96 per cent.

The Annual General Meeting decided that the Supervisory Board of VR-Group Ltd will have 12 members. The following persons were selected as ordinary members of the supervisory board for VR Group Ltd: Ville Tavio (chair), Touko Aalto, Thomas Blomqvist, Lauri Ihalainen, Elsi Katainen, Timo V. Korhonen, Kai Mykkänen (until 13 September 2016), Outi Mäkelä, Arto Pirttilahti, Riikka Slunga-Poutsalo, Katja Taimela and Erkki Virtanen (until 13 September 2016). The extraordinary general meeting for VR Group Ltd held on 13 September 2016 selected Kalle Jokinen and Joonas Leppänen as ordinary members of the Supervisory Board. The Supervisory Board met eight times during the year.

Representatives of personnel organisations also attend the meetings of the Supervisory Board of VR-Group Ltd. The representatives of employee organisations have been: Vesa Mauriala, chairman of Raideammattilaisten yhteisjärjestö JHL (Railway section of the trade union JHL); Risto Elonen, chairman of the Finnish Locomotivemen’s Union; Johanna Wäre, chair of the Rautatiealan Teknisten Liitto (Union of Railway Technical Personnel); Kari Vähäuski, chairman of Rautatievirkamiesliitto (Union of Railway Officials); and Veijo Sundqvist, chairman of VR Akava. 13

Ernst & Young Oy, Authorised Public Accountants, was elected as auditor, with Mikko Rytilahti, APA, CPFA, as principal auditor.

Major events after the end of the financial year

In order to improve the competitiveness and cost efficiency of rolling stock maintenance, it was decided to move the machine shop work in Hyvinkää to other maintenance units, primarily to the Helsinki depot at Ilmala. The measures will be implemented in stages throughout 2017 and 2018.

At the start of February, VR Track’s new competitiveness contract entered into force. This contract contains clarifications of employment conditions agreed between personnel representatives and employer representatives, with a focus on conditions relating to working hours and travel. The contract ensures the market competitiveness of VR Track's employment conditions.

In February, Martti Koskinen was named as Director of VR Transpoint, with Rolf Jansson having transferred already in 2016 to become President and CEO of VR Group Ltd.

Outlook for 2016

At the end of 2016, a wide-ranging passenger experience development programme was initiated for VR long-distance passenger services. This programme involved both the development of individualised customer service and updates to digital channels. Travel concepts will also be renewed in the coming years, especially for Extra Class and train restaurants. In addition, reforms to the operational control system will be initiated leading to a modernisation of seat reservation, rolling stock planning, and control operations. Travel chain development represents the business of the future, in which VR seeks cooperation with other modes of transport to offer a seamless travel experience.

The outlook for VR Transpoint in 2017 continues to be closely connected with the growth prospects of Finnish industries and the economic and political situation in Russia. Economic conditions are expected to remain moderately positive. Efforts are being made in cooperation with customers to forge new operating models to improve transport system efficiency, and at the same time new growth opportunities are being actively sought. Customer-orientated systems development continues, supported by our service promises.

The operating environment for VR Track is expected to remain at the 2016 level. Competition will remain right, however, even though an upturn in the construction markets is in sight. The outlook in Finland is reasonable. In Sweden, the tough competition and the need to raise the profitability of operations to the desired level will present challenges in 2017.

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Board’s proposal on the disposal of profit

The parent company’s distributable profit totalled EUR 91.8 million, which includes a net profit for the year of EUR 42.5 million. No fundamental changes have taken place in the Group’s financial position since the end of the financial year.

The Board of Directors proposes to the Annual General Meeting that VR Group Ltd pay a dividend of EUR 90 million (equivalent to EUR 40.91 per share) from distributable funds and that the remaining funds be retained under shareholder equity.

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CONSOLIDATED INCOME STATEMENT (1,000 €) Note 1.1.⎼31.12.2016 1.1.⎼31.12.2015 Net sales 1 1,186,717 1,231,415

Change in inventories of finished goods and work 0 -8 in progress Production for own use 16,357 18,957 Income from associated companies 2,276 1,173 Other operating income 2 47,431 60,155

Materials and services 3 -352,760 -362,580 Personnel expenses 4 -476,637 -491,304 Depreciations, amortizations and impairment losses 5 -130,011 -117,819 Other operating expenses 6 -250,114 -274,623 Expenses, total -1,209,521 -1,246,326

Operating profit 7 43,260 65,366

Financial income and expenses 8 -8,920 -1,750 Profit before taxes 34,340 63,617

Income taxes 11 -12,048 -12,893 Minority interest -1,140 -683 Net profit 21,152 50,041 16

CONSOLIDATED BALANCE SHEET (1,000 €) Adjusted Note 31.12.2016 31.12.2015 ASSETS

Non-current assets Intangible assets 12 92,578 98,186 Goodwill on consolidation 12 0 0 Tangible assets 12 1,331,243 1,299,398 Investments 13 Holdings in and receivables from 12,533 15,768 associated companies Other investments 12,638 14,968 Non-current assets, total 1,448,992 1,428,320 Current assets Inventories 14 84,616 92,609 Deferred tax assets 15 3,122 1,768 Long-term receivables 15 3,710 198 Short-term receivables 15 170,744 201,429 Financial securities 16 257,140 276,815 Cash and cash equivalents 33,899 27,409 Current assets, total 553,231 600,228 ASSETS TOTAL 2,002,222 2,028,548

EQUITY AND LIABILITIES

Equity 17 Share capital 370,013 370,013 Statutory reserve 525,754 525,808 Fair value reserve -46,246 -60,882 Retained earnings 476,166 534,435 Net profit for the year 21,152 50,041 Equity, total 1,346,838 1,419,416 Minority interest 5,983 5,358 Provisions 18 15,201 4,762 Liabilities Deferred tax liabilities 18 86,411 84,904 Long-term liabilities 19 298,157 262,872 Short-term liabilities 19 249,633 251,236 Liabilities, total 634,201 599,012 EQUITY AND LIABILITIES TOTAL 2,002,222 2,028,548 17

CONSOLIDATED CASH FLOW STATEMENT (1,000 €) Reported 1.1.⎼31.12.2016 1.1.⎼31.12.2015 Cash flow from operating activities Operating profit 43,260 65,366 Adjustments to operating profit 1) 93,845 92,014 Change in inventories 7,951 -1,288 Change in short-term receivables 30,787 -4,490 Change in short-term liabilities 9,456 -15,981 Interest received 1,588 1,912 Interest paid and payments for other financial -7,481 -5,836 transactions Dividends received 3,929 152 Income taxes paid -15,853 -6,757 Net cash from operating activities 167,483 125,092

Cash flow from investing activities Capital expenditure on fixed assets -101,411 -91,022 Disposal of fixed assets 17,578 22,082 Change in holdings in associated companies 2) 2,405 6,544 Subsidiaries sold 3) 0 -4,842 Change in other shares and holdings 1 0 Change in other long-term investments 2,329 15,315 Net cash from investing activities -79,099 -51,925

Cash flow before financing activities 88,385 73,168

Cash flow from financing activities Change in long-term receivables -1,076 71 Change in long-term liabilities 23 385 Change in short-term interest-bearing liabilities 0 20 Dividends paid -100,000 -100,003 Dividends paid to minority interests -515 -413 Net cash from financing activities -101,569 -99,940

Change in cash and cash equivalents -13,184 -26,773

Cash and cash equivalents 1.1. 304,223 330,996 Cash and cash equivalents 31.12. 291,039 304,223

Cash and cash equivalents consist of financial securities and cash and cash equivalents.

1) Planned depreciations, other non-cash flow items and items showed elsewhere in cash flow. 2) VR Track Ltd sold 10 % of Vossloh Cogifer Finland Oy in July 2016 and owned 30 % of the company at year end 2016. VR Track Ltd sold 10 % of Vossloh Rail Services Finland Oy in October 2016 and owned 30 % of the company at year end 2016. VR Track Ltd sold the welding and turnout business areas to Vossloh Group in the end of June 2015. Together with Vossloh Group VR Track Ltd established two associated companies, Vossloh Cogifer Finland Oy and Vossloh Rail Services Finland Oy, to run these business areas. VR Track Ltd owned 40 % of these companies at year end 2015. 3) Subsidiaries sold less cash and cash equivalents at time of sales. 18

PARENT COMPANY INCOME STATEMENT (1,000 €) Note 1.1.⎼31.12.2016 1.1.⎼31.12.2015 Net sales 1 754,336 786,278

Production for own use 16,357 15,193 Other operating income 2 66,213 75,320

Materials and services 3 -177,788 -189,104 Personnel expenses 4 -299,727 -317,566 Depreciations, amortizations and impairment 5 -116,273 -108,663 losses Other operating expenses 6 -190,889 -216,429 Expenses, total -784,677 -831,763

Operating profit 52,229 45,028

Financial income and expenses 8 -7,273 143 Profit before appropriations and taxes 44,956 45,171

Change in depreciation difference 9 -8,185 -19,465 Group contributions 10 16,235 13,723 Income taxes 11 -10,488 -7,373 Net profit 42,518 32,056 19

PARENT COMPANY BALANCE SHEET (1,000 €) Adjusted Note 31.12.2016 31.12.2015 ASSETS

Non-current assets Intangible assets 12 86,746 92,768 Tangible assets 12 1,232,107 1,206,163 Investments 13 Holdings in and receivables from group companies 56,012 58,512 Holdings in and receivables from associated 3,753 3,753 companies Other investments 12,576 14,906 Non-current assets, total 1,391,194 1,376,103 Current assets Inventories 14 67,327 70,532 Long-term receivables 15 4,182 22,431 Short-term receivables 15 97,158 122,493 Financial securities 16 257,140 276,815 Cash and cash equivalents 27,867 22,202 Current assets, total 453,674 514,472 ASSETS TOTAL 1,844,869 1,890,575

EQUITY AND LIABILITIES

Equity 17 Share capital 370,013 370,013 Statutory reserve 525,754 525,754 Fair value reserve -46,246 -60,882 Retained earnings 95,555 171,749 Net profit for the year 42,518 32,056 Equity, total 987,594 1,038,690 Appropriations 18 421,439 413,254 Provisions 18 9,759 1,346 Liabilities Long-term liabilities 19 241,140 216,323 Short-term liabilities 19 184,936 220,962 Liabilities, total 426,077 437,285 EQUITY AND LIABILITIES TOTAL 1,844,869 1,890,575 20

PARENT COMPANY CASH FLOW STATEMENT (1,000 €) Reported 1.1.⎼31.12.2016 1.1.⎼31.12.2015 Cash flow from operating activities Operating profit 52,229 45,028 Adjustments to operating profit 1) 87,895 93,181 Change in inventories 3,205 -3,544 Change in short-term receivables 22,908 1,960 Change in short-term liabilities -545 -20,913 Interest received 2,113 2,305 Interest paid and payments for other financial -8,178 -2,713 transactions Dividends received 1,441 721 Income taxes paid -14,719 -6,445 Net cash from operating activities 146,349 109,582

Cash flow from investing activities Capital expenditure on fixed assets -96,678 -82,661 Disposal of fixed assets 15,473 19,968 Subsidiaries sold 0 3 Change in other shares and holdings 1 0 Change in other long-term investments 2,329 15,270 Net cash from investing activities -78,875 -47,420

Cash flow before financing activities 67,474 62,162

Cash flow from financing activities Change in long-term receivables 20,684 787 Change in short-term interest-bearing receivables 6,672 0 Change in long-term liabilities 23 33 Change in short-term interest-bearing liabilities 15 -4 Group contributions 14,223 17,850 Dividends paid -100,000 -100,003 Change in funds transferred to Group accounts -23,099 -2,453 Net cash from financing activities -81,484 -83,791

Change in cash and cash equivalents -14,009 -21,629

Cash and cash equivalents 1.1. 299,016 320,646 Cash and cash equivalents 31.12. 285,007 299,016

Cash and cash equivalents consist of financial securities and cash and cash equivalents.

1) Planned depreciations, other non-cash flow items and items showed elsewhere in cash flow. 21

ACCOUNTING PRINCIPLES

Scope of consolidated financial statements

The consolidated financial statements comprise the parent company, all subsidiaries and associated companies. More information about the companies in the Group is given below in note 13.

The parent company in VR Group is VR-Group Ltd and its domicile is Helsinki, Finland. Copies of the consolidated financial statements are available from the company's head office at Vilhonkatu 13, P.O. Box 488, 00101 Helsinki, Finland.

Principles for consolidation

Intragroup shareholdings

The consolidated financial statements are prepared using the aquisition method. Goodwill on consolidation is amortized in five years.

Intragroup transactions and margins

Intragroup transactions, internal receivables and liabilities as well as internal distribution of profit are eliminated.

Minority interests

Minority interests are separated from the Group's equity and net profit and shown as a separate item.

Associated companies

Associated companies are consolidated using the equity method. The Group's share of profit in associated companies is shown as a separate item.

Comparability of the consolidated financial statements

The consolidated financial statements are prepared in accordance with the Finnish Accounting Act of 30 December 1997 (1336). The figures for comparison are from the financial year 1 January⎼31 December 2015, 12 months. The balance sheet for 2015 has been adjusted regarding derivatives and financial leasing agreements. The income statement for 2015 has not been adjusted. From the beginning of 2016 the depreciation period for passenger coaches has been extended from 20 years to 30 years and new spare part bogies are reclassed from inventories to tangible assets. The figures for 2015 have not been adjusted.

The effect of derivatives to the adjusted balance sheet for 2015 is: M€ +0.1 long-term derivative assets, M€ -60.9 fair value reserve in restricted equity, M€ +51.3 long-term derivative liabilities and M€ +9.7 short-term accrued expenses and prepaid income.

The effect of financial leasing agreements to the adjusted balance sheet for 2015 is: M€ +227.9 tangible assets, M€ +3.3 retained earnings in unrestricted equity, M€ +211.2 long-term financial leasing liabilities, M€ +17.3 short-term financial leasing liabilities and M€ -3.8 short-term accounts payables. 22

Comparability of parent company financial statements

The parent company financial statements are prepared in accordance with the Finnish Accounting Act of 30 December 1997 (1336). The figures for comparison are from the financial year 1 January - 31 December 2015, 12 months. The balance sheet for 2015 has been adjusted regarding derivatives and financial leasing agreements. The income statement for 2015 has not been adjusted. From the beginning of 2016 the depreciation period for passenger coaches has been extended from 20 years to 30 years and new spare part bogies are reclassed from inventories to tangible assets. The figures for 2015 have not been adjusted.

The effect of derivatives to the adjusted balance sheet for 2015 is: M€ +0.1 long-term derivative assets, M€ -60.9 fair value reserve in restricted equity, M€ +51.3 long-term derivative liabilities and M€ +9.7 short-term accrued expenses and prepaid income.

The effect of financial leasing agreements to the adjusted balance sheet for 2015 is: M€ +179.3 tangible assets, M€ +4.8 retained earnings in unrestricted equity, M€ +164.6 long-term financial leasing liabilities and M€ +9.8 short-term financial leasing liabilities.

Essential corrections of errors regarding earlier financial years

In 2016 retained earnings have been corrected regarding land area sold by VR-Group Ltd in 2014 and an unbooked provision for cleaning contaminated land in connection with that. The effect in equity is M€ -8.3 in 2016.

Valuation principles

Fixed assets are capitalized at direct acquisition costs. Fixed assets totalling M€ 16.4 (M€ 15.2) were produced for own use.

Inventories are valued at average cost in line with the prudence concept of accounting. Production for own use included in inventories is valued at direct production costs. Work in progress includes variable costs accrued at the balance sheet date. Production for own use included in inventories also includes a part of fixed costs.

Financial securities are valued at acquisition cost.

Receivables, liabilities and other commitments in foreign currencies are translated into Euros at average exchange rate at the balance sheet date published by the European Central Bank.

Balance sheets of foreign subsidiaries are consolidated at average exchange rate at the balance sheet date and income statements at average exchange rate of the financial year published by the European Central bank.

Financial leasing

From the beginning of 2016 VR Group applies § 5:5b of the Finnish Accounting Act, according to which assets acquired by financial leasing agreements can be booked in the financial statements. In other words if a group company has done a leasing agreement according to which the risks and benefits of the leasing object essentially are transferred to the lessee at the beginning of the leasing period, the lessor can book the asset in its financial statament as if the asset was sold and the lessee as if the asset was bought. 23

In VR Group the financial leasing commitments of rolling stock and vehicles, where risks and benefits essentially are transferred to the lessee at the beginning of the leasing period, are booked in the balance sheet. Earlier these commitments have been reported only in the notes. In practice machinery and equipment as well as liabilities have increased in the balance sheet and in the income statement leasing costs have decreased while depreciations and financial costs have increased. The balance sheet for 2015 has been adjusted, but not the income statement.

Derivatives

From the beginning of 2016 VR Group applies § 5:2a of the Finnish Accounting Act, according to which derivatives can be booked in the balance sheet at fair value. The fair values are based either on market prices at the balance sheet date or on net present values of future cash flows by using interest rates at the balance sheet date.

Changes in derivatives' fair values are booked in the balance sheet in fair value reserve in restricted equity when hedge accounting principles are applicable and the hedges are effective. If the hedge accounting principles are not applicable or the hedges are not effective, the changes in fair values are booked in the income statement. The effectiveness of the hedges is tested annually with sensitivity analysis.

Recognition of revenue of long-term projects

Revenue from VR Track's contruction projects is recognized as a precentage of completion. The precentage of completion is determined by monitoring the actual project costs to date and comparing them with the estimated total costs of the project. As net sales is recognized a share of the estimated total revenue of the projects based on the precentage of their completion. In case of estimated losses from long-term projects, losses from the uncompleted precentage of the projects are recognized as provisions.

Pensions

The statutory pension security under the Employees' Pensions Act (TyEL) is arranged through an external pension insurance company. Pension costs are expensed as incurred. Some of the employees enjoy a supplementary pension plan, which is arranged through VR Pension Fund. The Pension Fund is closed since 1.7.1995. The Pension Fund administers supplementary pension benefits for 1,129 employees at year end 2016. In 2016 no additional payments were paid to the VR Pension Fund. The Group's pension commitments are fully covered.

Deferred taxes

Deferred tax liabilities and receivables are calculated for temporary differences between taxation and the financial statement using the tax rate for the following years as confirmed at the balance sheet date. In the balance sheet the deferred tax liabilities are included altogether and the deferred tax receivables are included to an estimated likely receivable.

In order to follow the principle of prudence the Group has not recorded deferred tax receivables in the balance sheet from confirmed losses and losses from the financial year to be confirmed regarding foreign group companies. 24

1 Net sales by business segment and geographical area (1,000 €) Group Parent company 2016 2015 2016 2015 Net sales by business segment Passenger services Rail services 379,797 412,171 379,868 412,250 Road services 87,046 88,208 0 0 Catering and restaurant services 35,126 34,374 0 0 VR Transpoint Rail services 301,603 292,952 301,979 293,568 Road services 79,081 87,503 60,271 61,141 VR Track 294,281 300,472 0 0 Other services 9,783 15,734 12,218 19,319 Total 1,186,717 1,231,415 754,336 786,278

Net sales by geographical area Finland 1,115,135 1,140,025 754,336 786,278 Rest of Europe 71,581 91,391 0 0 Total 1,186,717 1,231,415 754,336 786,278

Revenue from long-term track construction projects is recognized as a percentage of completion, calculated from actual costs and estimated total costs. The amount recognized during the year was M€ 225.1 (M€ 249.0).

2 Other operating income (1,000 €) Group Parent company 2016 2015 2016 2015 Rental income 17,894 17,190 24,621 24,049 Profit on sale of non-current assets 17,144 23,264 14,609 17,933 Other income 12,394 19,701 26,983 33,338 Total 47,431 60,155 66,213 75,320

3 Materials and services (1,000 €) Group Parent company 2016 2015 2016 2015 Materials and supplies (goods) Purchases during the year -174,694 -193,790 -88,011 -105,172 Change in inventories -6,659 1,909 -3,205 3,544 External services purchased -171,407 -170,698 -86,571 -87,476 Total -352,760 -362,580 -177,788 -189,104 25

4 Employees and personnel expenses

The average number of employees by business segment was as follows: Group Parent company 2016 2015 2016 2015 Passenger services 2,502 2,720 1,285 1,450 VR Transpoint 1,316 1,472 1,178 1,245 VR Track 1,711 1,739 0 0 Maintenance 964 1,156 964 1,156 Train operations 1,078 1,198 1,078 1,198 Other Group services 327 330 327 330 Total 7,898 8,615 4,831 5,379

Personnel expenses (1,000 €) Group Parent company 2016 2015 2016 2015 Wages and salaries -380,706 -396,027 -242,295 -258,478 Pension expanses -64,628 -65,496 -41,143 -43,074 Other personnel related expenses -31,303 -29,781 -16,289 -16,014 Total -476,637 -491,304 -299,727 -317,566

Management renumeration (1,000 €) Group Parent company 2016 2015 2016 2015 CEOs -2,039 -2,175 -758 -768 Members of Boards of Directors -314 -333 -308 -319 Supervisory Board -53 -54 -53 -54 Total -2,406 -2,562 -1,118 -1,141

The CEOs of VR-Group Ltd and VR Track Ltd changed in 2016. Reported personnel expenses include statutory payments, such as annual holidays, paid to the former CEOs at the end of their employments. In addition, VR-Group Ltd's former CEO's reported personnel expenses include expenses when working with special management task 20.10.⎼31.11.2016. The former CEO of VR-Group Ltd has also had a personal additional pension insurance, including life insurance in case of death, of 9,604.50 euro paid by the employer. 26

5 Depreciations, amortizations and impairment losses (1,000 €) Group Parent company 2016 2015 2016 2015 Planned depreciations and amortizations Intangible assets -19,730 -17,912 -17,921 -16,580 Buildings and structures -16,049 -15,879 -15,754 -15,603 Tractive and rolling stock -71,136 -69,214 -71,136 -69,214 Other machinery and equipment -22,250 -13,706 -8,167 -6,528 Other tangible assets -846 -805 -797 -738 Amortization of goodwill on consolidation 0 -303 0 0 Impairment losses Holdings in group companies 0 0 -2,500 0 Total -130,011 -117,819 -116,273 -108,663

Planned depreciations are calculated on a straight-line basis from the original acquisition cost based on the expected economic life of the non-current assets except for buildings and structures.

Planned depreciation periods and methods are: Intangible assets 5 years straight-line Other capitalized long-term expenses 3⎼10 years straight-line Buildings 4%⎼7% declining Sturctures 20% declining Tractive stock 30 years straight-line Electric trains 25 years straight-line Rolling stock 15⎼30 years* straight-line Other machinery and equipment 5⎼15 years straight-line Other tangible assets 5⎼30 years straight-line *The depreciation period for passenger coaches has been extended from 20 years to 30 years from the beginning of 2016. The new depreciation period better reflects the economic life of the assets.

6 Other operating expenses (1,000 €) Group Parent company 2016 2015 2016 2015 Track access fee and tax -45,413 -44,451 -45,413 -44,451 Rents and other real estate expenses -60,031 -82,360 -50,014 -66,036 Travel and other personnel expenses -32,490 -39,849 -17,583 -25,355 Telecommunication and information -44,365 -46,842 -35,389 -39,016 management expenses Other transportation expenses -22,767 -20,013 -21,238 -17,725 Administration and other expenses -45,049 -41,108 -21,252 -23,845 Total -250,114 -274,623 -190,889 -216,429

Auditors' fees (1 000 €) Group Parent company 2016 2015 2016 2015 Auditing fees -309 -172 -132 -71 Tax advisory services -12 -4 -3 -4 Other services -51 -52 -8 -43 Total -371 -228 -143 -118 27

7 Operating profit by main business segments (1,000 €) Group 2016 2015 Passenger services 16,609 9,882 VR Transpoint 34,513 27,045 VR Track -14,104 18,141 Others 6,242 10,299 Total 43,260 65,366

8 Financial income and expenses (1,000 €) Group Parent company 2016 2015 2016 2015 Dividend income From group companies 0 0 752 570 From associated companies 0 0 688 150 From others 2 2 1 2 Dividend income, total 2 2 1,441 721

Interest income from long-term investments From group companies 0 0 310 47 From associated companies 43 88 43 88 From others 105 173 104 173 Other short-term interest and financial income From group companies 0 0 229 369 From associated companies 1 10 1 10 From others 5,250 4,529 3,496 3,786 Interest and other financial income, total 5,398 4,801 4,183 4,473

Interest expenses and other financial expenses To group companies 0 0 0 -7 To others -14,320 -6,552 -12,897 -5,044 Interest and other financial expenses, total -14,320 -6,552 -12,897 -5,052

Financial income and expenses, total -8,920 -1,750 -7,273 143

9 Change in depreciation difference (1,000 €) Parent company 2016 2015 Difference between planned depreciations and depreciations in taxation

Change in depreciation difference (increase -, decrease +) -8,185 -19,465 In the consolidated financial statements the depreciation difference is divided into net profit and non-restricted equity as well as change in deferred tax liabilities and deferred tax liabilities.

10 Group contributions (1,000 €) Parent company 2016 2015 Group contributions received 17,100 14,223 Group contributions paid -865 -500 Total 16,235 13,723

11 Income taxes (1,000 €) Group Parent company 2016 2015 2016 2015 Income tax on operating activities -11,130 -7,295 -10,496 -7,360 Income tax related to previous years -726 -29 8 54 Deferred taxes -192 -5,569 0 -67 Total -12,048 -12,893 -10,488 -7,373 28

12 Non-current assets (1,000 €)

Intangible assets Tangible assets Intangible rights Advanced and other Machinery and Goodwill on Land and water Buildings and Machinery and Other tangible payments and Group 2016 capitalised Goodwill Total equipment Total Assets, total consolidation areas structures equipment assets construction in long-term financial leasing progress expenditure Aquisition cost 1.1. 171,383 282 11,033 182,698 47,346 422,442 1,769,045 275,123 15,611 97,851 2,627,417 2,810,115 Translation difference 0 0 0 0 0 9 323 0 0 -38 294 294 Increases 0 0 0 0 64 0 233 56,829 0 101,074 158,201 158,201 Decreases -121 0 0 -121 -647 -782 -8,569 0 0 -38 -10,035 -10,156 Reclassifications 14,193 0 0 14,193 27 4,974 50,733 0 774 -70,701 -14,193 0 Aquisition cost 31.12. 185,454 282 11,033 196,769 46,790 426,643 1,811,765 331,952 16,385 128,148 2,761,684 2,958,453

Accumulated depreciation 1.1. -73,211 -267 -11,033 -84,511 0 -186,411 -1,084,682 -47,206 -9,721 0 -1,328,020 -1,412,531 Translation difference 0 0 0 0 0 -7 -58 0 0 0 -65 -65 Decreases 50 0 0 50 0 450 7,474 0 0 0 7,924 7,975 Depreciations of the year -19,725 -5 0 -19,730 0 -16,049 -77,470 -15,916 -846 0 -110,281 -130,011 Accumulated depreciation 31.12. -92,886 -272 -11,033 -104,191 0 -202,016 -1,154,737 -63,122 -10,567 0 -1,430,441 -1,534,632

Book value 31.12. 92,569 10 0 92,578 46,790 224,627 657,028 268,830 5,818 128,148 1,331,243 1,423,821

Intangible assets Tangible assets Intangible rights Advanced and other Goodwill on Land and water Buildings and Machinery and Other tangible payments and Group 2015 reported capitalised Goodwill Total Total Assets, total consolidation areas structures equipment assets construction in long-term progress expenditure Aquisition cost 1.1. 158,417 362 22,199 180,978 47,868 408,169 1,751,681 16,866 74,662 2,299,247 2,480,225 Translation difference 1 0 0 1 0 -4 -81 23 0 -62 -61 Increases 8 0 0 8 4 0 1,055 74 89,562 90,694 90,702 Decreases -1,362 -81 -11,166 -12,608 -898 -2,785 -17,538 -1,247 623 -21,846 -34,454 Reclassifications 14,318 0 0 14,318 372 17,062 33,928 -104 -66,996 -15,738 -1,420 Aquisition cost 31.12. 171,383 282 11,033 182,698 47,346 422,442 1,769,045 15,611 97,851 2,352,295 2,534,992

Accumulated depreciation 1.1. -56,568 -327 -21,634 -78,529 0 -172,029 -1,016,653 -9,962 0 -1,198,644 -1,277,173 Translation difference 0 0 0 0 0 3 25 0 0 28 28 Increases 0 0 0 0 0 0 -1,126 0 0 -1,126 -1,126 Decreases 1,055 292 10,954 12,301 0 1,576 15,933 1,146 0 18,655 30,956 Depreciations of the year -17,679 -233 -353 -18,264 0 -15,879 -82,920 -805 0 -99,604 -117,869 Reclassifications -18 0 0 -18 0 -82 59 -99 0 -122 -140 Accumulated depreciation 31.12. -73,211 -267 -11,033 -84,511 0 -186,411 -1,084,682 -9,721 0 -1,280,814 -1,365,325

Book value 31.12. 98,172 15 0 98,186 47,346 236,032 684,362 5,890 97,851 1,071,481 1,169,667 29

Intangible assets Tangible assets

Intangible rights Advanced and other Machinery and Goodwill on Land and water Buildings and Machinery and Other tangible payments and Group 2015 adjusted capitalised Goodwill Total equipment Total Assets, total consolidation areas structures equipment assets construction in long-term financial leasing progress expenditure Aquisition cost 1.1. 158,417 362 22,199 180,978 47,868 408,169 1,751,681 16,866 74,662 2,299,247 2,480,225 Translation difference 1 0 0 1 0 -4 -81 23 0 -62 -61 Increases 8 0 0 8 4 0 1,055 275,123 74 89,562 365,817 365,825 Decreases -1,362 -81 -11,166 -12,608 -898 -2,785 -17,538 0 -1,247 623 -21,846 -34,454 Reclassifications 14,318 0 0 14,318 372 17,062 33,928 -104 -66,996 -15,738 -1,420 Aquisition cost 31.12. 171,383 282 11,033 182,698 47,346 422,442 1,769,045 275,123 15,611 97,851 2,627,417 2,810,115

Accumulated depreciation 1.1. -56,568 -327 -21,634 -78,529 0 -172,029 -1,016,653 -9,962 0 -1,198,644 -1,277,173 Translation difference 0 0 0 0 0 3 25 0 0 28 28 Increases 0 0 0 0 0 0 -1,126 -47,206 0 0 -48,332 -48,332 Decreases 1,055 292 10,954 12,301 0 1,576 15,933 0 1,146 0 18,655 30,956 Depreciations of the year -17,679 -233 -353 -18,264 0 -15,879 -82,920 -805 0 -99,604 -117,869 Reclassifications -18 0 0 -18 0 -82 59 -99 0 -122 -140 Accumulated depreciation 31.12. -73,211 -267 -11,033 -84,511 0 -186,411 -1,084,682 -47,206 -9,721 0 -1,328,020 -1,412,531

Book value 31.12. 98,172 15 0 98,186 47,346 236,032 684,362 227,917 5,890 97,851 1,299,398 1,397,584

Intangible assets Tangible assets

Intangible rights Advanced and other Machinery and Land and water Buildings and Machinery and Other tangible payments and Parent company 2016 capitalised Goodwill Total equipment Total Assets, total areas structures equipment assets construction in long-term financial leasing progress expenditure Aquisition cost 1.1. 157,086 198 157,284 46,673 413,667 1,580,800 204,177 14,455 95,500 2,355,272 2,512,555 Increases 0 0 0 64 0 12 38,028 0 96,601 134,705 134,705 Decreases 0 0 0 -647 -737 -3,428 0 0 0 -4,812 -4,812 Reclassifications 11,898 0 11,898 0 4,445 48,817 0 774 -65,935 -11,898 0 Aquisition cost 31.12. 168,984 198 169,182 46,090 417,375 1,626,201 242,205 15,229 126,166 2,473,267 2,642,449

Accumulated depreciation 1.1. -64,317 -198 -64,515 0 -184,385 -930,996 -24,903 -8,825 0 -1,149,108 -1,213,624 Decreases 0 0 0 0 413 3,388 0 0 0 3,801 3,801 Depreciations of the year -17,921 0 -17,921 0 -15,754 -70,547 -8,756 -797 0 -95,853 -113,773 Accumulated depreciation 31.12. -82,238 -198 -82,436 0 -199,726 -998,155 -33,659 -9,621 0 -1,241,161 -1,323,597

Book value 31.12. 86,746 0 86,746 46,090 217,650 628,047 208,546 5,608 126,166 1,232,107 1,318,853 30

Intangible assets Tangible assets

Intangible rights Advanced and other Parent company 2015 Land and water Buildings and Machinery and Other tangible payments and capitalised Goodwill Total Total Assets, total reported areas structures equipment assets construction in long-term progress expenditure Aquisition cost 1.1. 148,175 198 148,373 47,273 399,783 1,535,301 13,866 71,194 2,067,417 2,215,790 Increases 0 0 0 4 0 93 0 82,895 82,992 82,992 Decreases -1,227 0 -1,227 -898 -2,746 14,487 -20 0 10,823 9,596 Reclassifications 10,138 0 10,138 294 16,629 30,920 608 -58,589 -10,138 0 Aquisition cost 31.12. 157,086 198 157,284 46,673 413,667 1,580,800 14,455 95,500 2,151,094 2,308,378

Accumulated depreciation 1.1. -48,728 -182 -48,910 0 -170,340 -840,894 -8,102 0 -1,019,336 -1,068,246 Decreases 975 0 975 0 1,558 -14,360 15 0 -12,787 -11,812 Depreciations of the year -16,564 -16 -16,580 0 -15,603 -75,742 -738 0 -92,083 -108,663 Accumulated depreciation 31.12. -64,317 -198 -64,515 0 -184,385 -930,996 -8,825 0 -1,124,205 -1,188,721

Book value 31.12. 92,768 0 92,768 46,673 229,281 649,805 5,630 95,500 1,026,889 1,119,657

Intangible assets Tangible assets Intangible rights Advanced and other Machinery and Parent company 2015 Land and water Buildings and Machinery and Other tangible payments and capitalised Goodwill Total equipment Total Assets, total adjusted areas structures equipment assets construction in long-term financial leasing progress expenditure Aquisition cost 1.1. 148,175 198 148,373 47,273 399,783 1,535,301 13,866 71,194 2,067,417 2,215,790 Increases 0 0 0 4 0 93 204,177 0 82,895 287,169 287,169 Decreases -1,227 0 -1,227 -898 -2,746 14,487 0 -20 0 10,823 9,596 Reclassifications 10,138 0 10,138 294 16,629 30,920 608 -58,589 -10,138 0 Aquisition cost 31.12. 157,086 198 157,284 46,673 413,667 1,580,800 204,177 14,455 95,500 2,355,272 2,512,555

Accumulated depreciation 1.1. -48,728 -182 -48,910 0 -170,340 -840,894 -8,102 0 -1,019,336 -1,068,246 Increases 0 0 0 0 0 0 -24,903 0 0 -24,903 -24,903 Decreases 975 0 975 0 1,558 -14,360 0 15 0 -12,787 -11,812 Depreciations of the year -16,564 -16 -16,580 0 -15,603 -75,742 -738 0 -92,083 -108,663 Accumulated depreciation 31.12. -64,317 -198 -64,515 0 -184,385 -930,996 -24,903 -8,825 0 -1,149,108 -1,213,624

Book value 31.12. 92,768 0 92,768 46,673 229,281 649,805 179,275 5,630 95,500 1,206,163 1,298,931 31

13 Investments (1,000 €) Receivables Holdings in Receivables Holdings in from group from group associated associated Other shares Other Group 2016 companies companies companies companies and holdings receivables Total Aquisition cost 1.1. 0 0 13,564 2,204 1,584 13,383 30,736

Increases 0 0 32 0 0 10,828 10,859

Decreases 0 0 -1,170 0 -1 -13,156 -14,327

Income from associated companies 0 0 1,830 0 0 0 1,830

Dividend from associated companies 0 0 -3,928 0 0 0 -3,928

Aquisition cost 31.12. 0 0 10,329 2,204 1,583 11,055 25,170

Book value 31.12. 0 0 10,329 2,204 1,583 11,055 25,170

Receivables Holdings in Receivables Holdings in from group from group associated associated Other shares Other Group 2015 companies companies companies companies and holdings receivables Total Aquisition cost 1.1. 0 0 6,204 2,204 1,629 28,699 38,737

Increases 0 0 6,348 0 0 4,861 11,209

Decreases 0 0 0 0 -45 -20,131 -20,176

Reclassifications 0 0 0 0 0 -46 -46

Income from associated companies 0 0 1,162 0 0 0 1,162

Dividend from associated companies 0 0 -150 0 0 0 -150

Aquisition cost 31.12. 0 0 13,564 2,204 1,584 13,383 30,736

Book value 31.12. 0 0 13,564 2,204 1,584 13,383 30,736

Receivables Holdings in Receivables Holdings in from group from group associated associated Other shares Other Parent company 2016 companies companies companies companies and holdings receivables Total Aquisition cost 1.1. 58,512 0 1,549 2,204 1,522 13,383 77,171

Increases 0 0 0 0 0 10,828 10,828

Decreases 0 0 0 0 -1 -13,156 -13,157

Impairment losses -2,500 0 0 0 0 0 -2,500

Aquisition cost 31.12. 56,012 0 1,549 2,204 1,521 11,055 72,342

Book value 31.12. 56,012 0 1,549 2,204 1,521 11,055 72,342

Receivables Holdings in Receivables Holdings in from group from group associated associated Other shares Other Parent company 2015 companies companies companies companies and holdings receivables Total Aquisition cost 1.1. 58,516 0 1,549 2,204 1,567 28,653 92,489

Increases 0 0 0 0 0 4,861 4,861

Decreases -3 0 0 0 -44 -20,131 -20,179

Aquisition cost 31.12. 58,512 0 1,549 2,204 1,522 13,383 77,171

Book value 31.12. 58,512 0 1,549 2,204 1,522 13,383 77,171

VR-Group Ltd has granted Pääkaupunkiseudun Junakalusto Oy an equity loan of M€ 2.2. 32

Investments include corporate and government bonds:

Group Parent company 2016 2015 2016 2015 Replacement value 11,334 13,442 11,334 13,442 Book value 11,055 13,383 11,055 13,383 Difference 279 59 279 59

Group and parent company holdings Group Parent company GROUP COMPANIES ownership -% ownership -% Napapiirin Turistiauto Oy, Helsinki 100 100 Oy Pohjolan Liikenne Ab, Helsinki 100 100 Transpoint International (FI) Oy, Helsinki 100 100 VR Track Ltd, Helsinki 100 100 OOO VR Transpoint, Russia 100 0 Oy Pohjolan Kaupunkiliikenne Ab, Helsinki 100 0 PL Fleet Oy, Helsinki 100 0 Transpoint International (EST) AS, Estonia 100 0 VR Infrapro AB, Sweden 100 0 VR Track Sweden AB, Sweden 100 0 AO Transpoint International (RU), Russia 100 0 Avecra Oy, Helsinki 60 60 Insinööritoimisto Arcus Oy, Turku 70 0 Kokkolan Tavaraterminaali Oy, Kokkola 53.4 53.4 Oulun Keskusliikenneasemakiinteistö Oy, Oulu 57.3 57.3

ASSOCIATED COMPANIES Freight One Scandinavia Oy, Helsinki 50 50 Oy ContainerTrans Scandinavia Ltd, Helsinki 50 50 Oy Karelian Trains Ltd, Helsinki 50 50 Metropolitan Area Rolling Stock Ltd, Helsinki 35 35 SeaRail Oy, Tampere 50 50 Seinäjoen Linja-autoasemakiinteistö Oy, Seinäjoki 20.7 20.7 Vainikkalan Vesi Oy, Lappeenranta 42.5 42.5 Varkauden Keskusliikenneasemakiinteistö Oy, Varkaus 33.3 33.3 Vossloh Cogifer Finland Oy, Kouvola 30 0 Vossloh Rail Services Finland Oy, Kouvola 30 0

14 Inventories (1,000 €) Group Parent company 2016 2015 2016 2015 Materials and supplies 84,616 91,220 67,327 70,532 Work in progress 0 1,389 0 0 Total 84,616 92,609 67,327 70,532 33

15 Receivables (1,000 €) Group Parent company Reported Adjusted Reported Adjusted 2016 2015 2015 2016 2015 2015 Long-term receivables

Receivables from group companies Loan receivables 473 22,233 22,233 Receivables from group companies, total 473 22,233 22,233

Receivables from others Deferred tax receivables 3,122 1,768 1,768 0 0 0 Long-term derivative assets 2,495 0 60 2,495 0 60 Other receivables 1,215 138 138 1,215 138 138 Receivables from others, total 6,831 1,906 1,966 3,710 138 198

Long-term receivables, total 6,831 1,906 1,966 4,182 22,371 22,431

Deferred tax receivables From temporary differences 3,122 1,768 1,768 0 0 0

In order to follow the principle of prudence the Group has not recorded deferred tax receivables from confirmed losses and losses from the financial year to be confirmed regarding foreign group companies when it is not likely that taxable income will occur from which the losses can be deducted. The Group had such deferred tax receivables unrecorded M€ 8.8 31.12.2016 (M€ 1.0 31.12.2015).

Short-term receivables

Receivables from group companies Accounts receivable 538 1,994 1,994 Loan receivables 6,584 13,256 13,256 Other receivables 17,100 14,223 14,223 Prepaid expenses and accrued income 326 219 219 Receivables from group companies, total 24,547 29,692 29,692

Receivables from associated companies Accounts receivable 975 913 913 772 487 487 Receivables from associated 975 913 913 772 487 487 companies, total

Receivables from others Accounts receivable 123,234 109,997 109,997 51,549 47,420 47,420 Other receivables 1,636 2,899 2,899 100 105 105 Prepaid expenses and accrued income 44,899 87,620 87,620 20,189 44,789 44,789 Receivables from others, total 169,769 200,516 200,516 71,838 92,314 92,314

Short-term receivables, total 170,744 201,429 201,429 97,158 122,493 122,493

Main items in prepaid expenses and accrued income

The main items in the Group's prepaid expenses and accrued income are accruals from sales and expenses M€ 27.7 (M€ 54.1) and precentage of completion receivables M€ 9.5 (M€ 27.1). The main items in the parent company's prepaid expenses and accrued income are accruals from sales and expenses M€ 17.3 (M€ 43.1). 34

16 Financial securities (1,000 €)

The financial securities include investment certificates and certificate of deposits issued by banks, funds, commerical papers and the part of corporate and government bonds maturing within a year.

Group Parent company 2016 2015 2016 2015 Replacement value 257,852 276,740 257,852 276,740 Book value 257,140 276,815 257,140 276,815 Difference 712 -75 712 -75

17 Equity (1,000 €) Group Parent company Reported Adjusted Reported Adjusted 2016 2015 2015 2016 2015 2015 Restricted equity Share capital 1.1. 370,013 370,013 370,013 370,013 370,013 370,013 Share capital 31.12. 370,013 370,013 370,013 370,013 370,013 370,013

Statutory reserve 1.1. 525,808 525,808 525,808 525,754 525,754 525,754 Reclassifications -55 0 0 0 0 0 Statutory reserve 31.12. 525,754 525,808 525,808 525,754 525,754 525,754

Fair value reserve 1.1. -60,882 0 0 -60,882 0 0 Increases 14,636 0 60 14,636 0 60 Decreases 0 0 -60,942 0 0 -60,942 Fair value reserve 31.12. -46,246 0 -60,882 -46,246 0 -60,882

Restricted equity, total 849,521 895,822 834,939 849,521 895,767 834,885

Non-restricted equity Retained earnings 1.1. 584,476 631,060 631,060 203,805 266,950 266,950 Dividends paid -100,000 -100,003 -100,003 -100,000 -100,003 -100,003 Increases - Change in accounting principles 0 0 3,257 0 0 4,802 financial leasing Decreases - Correction of error regarding -8,250 0 0 -8,250 0 0 provisions for environmental obligations Translation differences -115 122 122 0 0 0 Reclassifications 55 0 0 0 0 0 Retained earnings 31.12. 476,166 531,179 534,435 95,555 166,947 171,749

Net profit for the year 21,152 50,041 50,041 42,518 32,056 32,056

Non-restricted equity, total 497,318 581,220 584,476 138,074 199,003 203,805

Equity, total 1,346,838 1,477,041 1,419,416 987,594 1,094,770 1,038,690

Calculation of distributable funds (1,000 €) Parent company Reported Adjusted 2016 2015 2015 Retained earnings 95,555 166,947 166,947 Net profit for the year 42,518 32,056 32,056 Change in accounting principles financial leasing 0 0 4,802 Negative fair value reserve -46,246 0 -60,882 Total 91,827 199,003 142,923 35

18 Provisions and appropriations (1,000 €)

Group Parent company 2016 2015 2016 2015 Provisions 15,201 4,762 9,759 1,346

Provisions M€ 15.2 (M€ 4.8) include expected warranty costs on long-term construction projects M€ 0.5 (M€ 0.6), provisions for losses on orders/contracts M€ 4.9 (M€ 2.8) and provisions for environmental obligations M€ 9.8 (M€ 1.3).

Parent company provisions include provisions for environmental obligations M€ 9.8 (M€ 1.3).

Appropriations

Untaxed Depreciation Transferred Deferred tax Minority Group 2016 Total Total reserves differences to equity liability interest

Book value 1.1. 0 424,094 424,094 339,197 84,819 78 424,094 Change in income statement 0 7,588 7,588 6,120 1,518 -49 7,588 Translation difference 0 0 0 0 0 0 0 Book value 31.12. 0 431,682 431,682 345,316 86,336 29 431,682

Untaxed Depreciation Transferred Deferred tax Minority Group 2015 Total Total reserves differences to equity liability interest

Book value 1.1. 0 400,982 400,982 320,768 80,196 17 400,982

Change in income statement 0 23,073 23,073 18,397 4,615 61 23,073 Translation difference 0 39 39 32 8 0 39 Book value 31.12. 0 424,094 424,094 339,197 84,819 78 424,094

Oman Laskennallise Untaxed Depreciation Parent company 2016 Total pääoman n verovelan Yhteensä reserves differences osuus osuus Book value 1.1. 0 413,254 413,254 330,603 82,651 413,254

Change in income statement 0 8,185 8,185 6,548 1,637 8,185 Book value 31.12. 0 421,439 421,439 337,151 84,288 421,439

Oman Laskennallise Untaxed Depreciation Parent company 2015 Total pääoman n verovelan Yhteensä reserves differences osuus osuus Book value 1.1. 0 393,789 393,789 315,031 78,758 393,789 Change in income statement 0 19,465 19,465 15,572 3,893 19,465 Book value 31.12. 0 413,254 413,254 330,603 82,651 413,254 36

19 Liabilities (1,000 €)

Group Parent company

Reported Adjusted Reported Adjusted

2016 2015 2015 2016 2015 2015

Long-term liabilities

Liabilities to others

Long-term financial leasing liabilities 249,024 0 211,187 192,007 0 164,638

Deferred tax liabilities 86,411 84,904 84,904 0 0 0

Long-term derivative liabilities 48,681 0 51,255 48,681 0 51,255

Other liabilities 453 430 430 453 430 430

Liabilities to others, total 384,568 85,335 347,777 241,140 430 216,323

Long-term liabilities, total 384,568 85,335 347,777 241,140 430 216,323

Liabilities due after five years

Long-term financial leasing liabilities 175,184 0 134,417 150,922 0 114,674

Long-term derivative liabilities 46,716 0 42,536 46,716 0 42,536

Deferred tax liabilities

From depreciation differences 86,336 84,819 84,819 0 0 0

From temporary differences 75 86 86 0 0 0

Deferred tax liabilities, total 86,411 84,904 84,904 0 0 0

Short-term liabilities

Liabilities to group companies

Accounts payable 1,717 2,144 2,144

Accrued expenses and prepaid income 1,306 1,043 1,043

Other liabilities 43,947 66,181 66,181

Liabilities to group companies, total 46,970 69,368 69,368

Liabilities to associated companies

Accounts payable 287 251 251 23 3 3

Liabilities to associated companies, total 287 251 251 23 3 3 37

Liabilities to others

Short-term financial leasing liabilities 18,412 0 17,283 10,057 0 9,835

Accounts payable* 47,778 50,314 46,504 32,364 30,355 30,355

Accrued expenses and prepaid income** 125,528 129,990 139,677 76,764 85,860 95,548

Other liabilities 21,731 23,022 23,022 6,104 9,642 9,642

Advances received 35,896 24,498 24,498 12,655 6,212 6,212

Liabilities to others, total 249,345 227,824 250,984 137,944 132,069 151,591

Short-term liabilities, total 249,633 228,076 251,236 184,936 201,440 220,962

Main items in accrued expenses and prepaid income

The main items in the Group's accrued expenses and prepaid income are salaries and wages M€ 88.7 (M€ 89.7) and accruals from sales and expenses M€ 30.2 (M€ 29.1). The main items in the parent company's accrued expenses and prepaid income are salaries and wages M€ 53.6 (M€ 56.3) and accruals from sales and expenses M€ 18.6 (M€ 22.2).

*The adjusted accounts payable in 2015 include M€ -3.8 adjustments for short-term financial leasing liabilities in the Group. **The adjusted accrued expenses and prepaid income in 2015 include M€ +9.7 adjustments for short-term derivative liabilities in the Group and M€ +9.7 adjustments for short-term derivative liabilities in the Parent company.

Due dates of financial leasing liabilities (1,000 €)

Group Parent company

Reported Adjusted Reported Adjusted

2016 2015 2015 2016 2015 2015 The gross leasing liabilities - the minimum rents are due

Within one year 18,412 0 17,283 10,057 0 9,835

Between one year and five years 73,840 0 76,770 41,085 0 49,964

After five years 175,184 0 134,417 150,922 0 114,674

Total 267,436 0 228,470 202,065 0 174,473

Future financial expenses -1,102 0 -2,771 -114 0 -103

The present value of leasing liabilities 268,538 0 231,241 202,179 0 174,576

The present value of leasing liabilities are due

Within one year 19,141 0 20,087 11,081 0 13,084

Between one year and five years 76,999 0 79,482 43,719 0 50,724

After five years 172,397 0 131,672 147,379 0 110,767

Total 268,538 0 231,241 202,179 0 174,576 38

20 Contingent liabilities (1,000 €)

Group Parent company Reported Adjusted Reported Adjusted 2016 2015 2015 2016 2015 2015 Liabilities with parent company's payment guarantee Financial leasing liabilities 267,436 0 228,470 202,064 0 174,473

The value of commitments given 4,272 0 5,371 4,272 0 5,371

Commitments given on: Own behalf 4,272 0 5,371 0 0 0 Group companies behalf 0 0 0 4,272 0 5,371

Other commitments given On own behalf Rental commitments 170 137 137 0 0 0 Leasing commitments 2,760 8,240 2,869 0 0 0 Mortgages in real estate due 6,100 6,100 6,100 6,100 6,100 6,100 to land rental agreements Land-use security 2,842 2,842 2,842 2,842 2,842 2,842

Construction work and Contract guarantees 39,120 46,700 46,700 0 0 0 Other commitments given 528 549 549 0 0 0

On own behalf, total 51,520 64,568 59,197 8,942 8,942 8,942

On Group companies behalf Rental commitments 0 0 0 170 137 137 Leasing commitments 0 0 0 2,760 8,240 2,869

Construction work and Contract guarantees 0 0 0 23,417 29,160 29,160 Other commitments given 0 0 0 528 549 549

On Group companies behalf, total 0 0 0 26,875 38,086 32,715

On others behalf

Loan commitments 45,651 48,581 48,581 45,651 48,581 48,581 On others behalf, total 45,651 48,581 48,581 45,651 48,581 48,581

Other commitments given, total 97,171 113,149 107,778 81,468 95,609 90,238

Commitments given, total 101,443 113,149 113,149 85,740 95,609 95,609

Rental commitments

Due in next financial year 3,208 3,189 1,213 995

Due in later financial year 5,239 6,124 1,816 1,979

Rental commitments, total 8,447 9,313 3,029 2,974

Leasing commitments

Due in next financial year 7,294 30,075 6,503 3,289 19,134 2,958

Due in later financial year 13,703 236,757 11,852 5,871 186,693 6,229 Leasing commitments, total 20,997 266,832 18,355 9,160 205,827 9,186 39

Leasing commitments are divided into financial leasing commitments, which are booked in the balance sheet, and other leasing commitments, which are not booked in the balance sheet. The financial leasing commitments mainly consist of leasing agreements for rolling stock and vehicles. The agreements for these leasing commitments comprise a purchase option and/or an obligation to nominate the purchaser of the leasing object. If a Group external party has been nominated as purchaser at the signing of the agreement, the leasing commitment is not booked in the balance sheet.

The other leasing commitments consist of IT-equipment and vehicles. IT-equipment has up to 5 years leasing agreements and no redemption clause is included. Vehicles have primarly 3 years leasing agreements and no redemption clause is included.

Pension commitments The pension commitments in VR Pension Fund was M€ 449.8 at year end 2016. VR Pension Fund has 1.25 times more assets than liabilities. VR-Group Ltd has rented two land areas from VR Pension Fund with ten year rental agreements.

Other commitments VR-Group Ltd and co-operation group Siemens Oy and Siemens AG signed an agreement 12.2.2014, where VR-Group Ltd orders 80 electric locomotives, their documentation, spare parts, tools and training. The commitment was worth M€ 314.5 at signing. The locomotives are delivered in years 2017⎻2026.

In addition VR-Group Ltd and Transtech Oy signed an agreement 31.3.2014, where VR-Group Ltd orders 27 passenger wagons, their documentation, spare parts, tools and training. The commitment was worth M€ 86.8 at signing. The wagons are delivered in years 2016⎼2017. 40

21 Derivatives (1,000 €)

According to the Treasury Policy VR Group uses interest rate and commodity derivatives to reduce interest and commodity risks. These risks arise from financial leasing liabilities and future electricity and fuel purchases.

Derivatives are booked in the balance sheet at fair value at the balance sheet date according to § 5:2a in the Finnish Accounting Act. The fair values are based on observable prices whereby the instruments could be sold or bought for at the balance sheet date. The fair values are defined as follows.

The fair values of all derivatives are based on prices at the balance sheet date received from the counterparties. The fair values of fuel and electricity derivatives are based on market prices at the balance sheet date. The fair values of interest rate swaps are calculated as net present value of future cash flows by using interest rates at the balance sheet date.

VR Group uses interest rate swaps to reduce variable interest rate risk of financial leases for rolling stock and financial leasing portfolio consisting of vehicles. The interest rate swaps are amortized and the last mature in 2034.

VR Group uses OTC-commodity derivatives, swaps and options, to hedge the price risk of light fuel oil used in trains. The market value is calculated by using 10PPM Ultra Low Sulphur Diesel-Cargoes CIF NWE-index.

VR Group uses OTC-commodity derivatives to control the price risk of electricity used in trains. The market value is calculated by using Nasdaq OMX prices for electricity derivatives.

VR Group applies hedge accounting principles when hedging future cash flows (cash flow hedge). These principles are applied when hedging fuel and electricity price risk and financial leases interest rate payments.

Changes in derivatives' fair values are booked in the balance sheet in fair value reserve in restricted equity when hedge accounting principles are applicable and the hedges are effective. If the hedge accounting principles are not applicable or the hedges are not effective, the changes in fair values are booked in the income statement in the financial items. In VR Group all derivatives are proved to be effective and changes in their fair values are booked in fair value reserve in restricted equity. The effectiveness of the hedges is tested annually with sensitivity analysis. Sensitivity analysis measures the value of the hedge and the hedged object when the market price increases either by unit price or percentage.

Derivatives fair values hierarchy is divided into three levels depending on how the fair values are defined. In VR Group the fair values are defined only according to hierarchy level 2 as the fair values are based on the counterparties' prices, which can be observed at the market.

2016 2015 Nominal Nominal Fair value Fair value value value Group Positive Negative Net Positive Negative Net Interest rate derivatives Interest rate swaps 259,048 0 -46,716 -46,716 274,798 0 -42,536 -42,536

Commodity derivatives Fuel derivatives, tons 5,400 289 0 289 7,200 0 -1,227 -1,227 Electricity derivatives, MWh 2,030,653 3,536 -3,355 181 1,582,694 60 -17,180 -17,120 Commodity derivatives, total 3,824 -3,355 469 60 -18,406 -18,347

Derivatives in hedge accounting, total 3,824 -50,071 -46,246 60 -60,942 -60,882

Derivatives outside hedge accounting, total 0 0 0 0 0 0

Derivatives, total 3,824 -50,071 -46,246 60 -60,942 -60,882

2016 2015 Nominal Nominal Fair value Fair value value value Parent company Positive Negative Net Positive Negative Net Interest rate derivatives Interest rate swaps 259,048 0 -46,716 -46,716 274,798 0 -42,536 -42,536

Commodity derivatives Fuel derivatives, tons 5,400 289 0 289 7,200 0 -1,227 -1,227 Electricity derivatives, MWh 2,030,653 3,536 -3,355 181 1,582,694 60 -17,180 -17,120 Commodity derivatives, total 3,824 -3,355 469 60 -18,406 -18,347

Derivatives in hedge accounting, total 3,824 -50,071 -46,246 60 -60,942 -60,882

Derivatives outside hedge accounting, total 0 0 0 0 0 0

Derivatives, total 3,824 -50,071 -46,246 60 -60,942 -60,882 41

22 Disputes

The Finnish Competition and Consumer Authority (FCCA) has given a penalty payment proposal regarding Oy Pohjolan Liikenne Ab and VR-Group Ltd to the Market Court on 25 January 2016. The amount of the penalty payment proposed by FCCA is 5,790,000 euros. FCCA’s proposal is pending in the Market Court and an oral hearing will be held in January⎻February 2017. Oy Pohjolan Liikenne Ab and VR-Group Ltd deny all of FCCA’s claims and the penalty payment proposal. Therefore, the penalty payment proposal has not been included in the financial statements.

VR Group does not have any other material pending disputes.

23 Group key financial figures Reported Adjusted 2016 2015 2015 2014 2013 2012 Scope of operations Net sales M€ 1,187 1,231 1,231 1,367 1,421 1,438 Balance sheet M€ 2,002 1,801 2,029 1,877 1,809 1,774 Gross capital expenditure* M€ 123 90 120 120 157 122 - as % of net sales % 10.3 7.3 9.7 8.8 11.0 8.5 Average number of man years 7,898 8,615 8,615 9,689 10,234 11,080

Profitability Operating profit M€ 43.3 65.4 65.4 90.4 70.6 52.4 - as % of net sales % 3.6 5.3 5.3 6.6 5.0 3.6 Net profit M€ 21.2 50.0 50.0 67.6 65.3 38.8 Return on investment (ROI) % 2.8 4.5 4.5 5.9 4.8 3.9 Return on equity (ROE) % 1.6 3.5 3.5 4.5 4.5 2.9

Solvency Equity ratio % 68.8 83.5 71.1 82.5 83.5 82.2

Liquidity Quick Ratio 2.1 2.4 2.1 2.2 2.0 1.7

Calculation of key figures

Capital invested = Balance sheet total - interest-free liabilities

Return on investment (ROI) = (Profit before taxes + interest costs and other financial costs)*100 Capital invested (average)

Return on equity (ROE) = (Profit before taxes - income taxes and change in deferred taxes)*100 Equity + minority interest (average)

Equity ratio = (Equity + minority interest)*100 Balance sheet total - short-term and long-term advanced payments received

Quick Ratio = Financial assets (pl. long-term receivables) - receivables on precentage of completion Short-term liabilities - short-term advanced payments received

*Gross capital expenditure includes leasing investments from 2016. Adjusted figure for 2015 also includes leasing investments. 42

Helsinki 2.3.2017

Hannu Syrjänen Riku Aalto Chairman of the Board

Liisa Rohweder Jarmo Kilpelä

Maija Strandberg Tuija Soanjärvi

Heikki Allonen Roberto Lencioni

Rolf Jansson CEO

A report on the audit performed has been issued today.

Helsinki 2.3.2017

Ernst & Young Oy Authorized Public Accountant Firm

Mikko Rytilahti Authorized Public Accountant 43

Auditor’s Report

To the Annual General Meeting of VR-Group Ltd

Report on the Audit of Financial Statements

Opinion

We have audited the financial statements VR-Group Ltd (business identity code 1003521-5) for the year ended 31 December, 2016. The financial statements comprise the balance sheets, the income statements, cash flow statements and notes for the group as well as for the parent company.

In our opinion, the financial statements give a true and fair view of the group’s and the company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

The Board of Directors and the Managing Director are responsible for the preparation of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland an comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of Financial Statements

44

Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

45

Other reporting requirements

Other information

The Board of Directors and the Managing Director are responsible for the other information. The other information comprises information included in the report of the Board of Directors. Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the information included in the report of the Board of Directors and, in doing so, consider whether the information included in the report of the Board of Directors is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. Our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations requirements.

If, based on the work we have performed, we conclude that there is a material misstatement in the information included in the report of the Board of Directors, we are required to report this fact. We have nothing to report in this regard.

Other opinions

We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the use of the profit shown in the balance sheet is in compliance with the Limited Liability Companies Act. We support that the members of the Supervisory Board as well as of the Board of Directors of the parent company and the Managing Directors should be discharged from liability for the financial period audited by us.

Helsinki, 2 March 2017

Ernst & Young Oy Authorized Public Accountant Firm

Mikko Rytilahti Authorized Public Accountant, Chartered Public Finance Auditor